How Hurricanes are Affecting Texas & Florida Manufacturing

Hurricanes Wreak Havoc on Supply Chains & Infrastructure

Two of the costliest Hurricanes in U.S. History, Harvey and Irma, have decimated Southern Texas and Florida in the last two weeks. The total cost of the damage is still being calculated, but economist Michael Montgomery of HIS Markit is reporting that August and September output data will be affected by Hurricane Harvey. “Supply disruptions will rock oil refining that accounted for 3 percent of industrial production last year, and the chemical industry, responsible for 12.4% of industrial production in 2016, Montgomery said Friday.”[1] This article will briefly explore how hurricanes are affecting manufacturing around the United States.

The U.S. Gulf Coast is home to a large amount of the oil production and many refineries that create base plastics for a large variety of industries. The disruption due to Hurricane Harvey is a major hit to supply chains all over the country, and manufacturers are struggling to find new short term suppliers. “If we get into the middle of September and we’re not back up and running and producing various plastics, even at some minimal sustainable rate, you’re going to start being concerned about the overall supply chain,” said Mark Eramo, Vice President of Global Chemical Business Development at IHS Markit.[2]

After Harvey, Hurricane Irma was quick to follow. Irma demolished the Florida Keys, took out power for half of all customers in the state, and brought storm surges to the southern and western sides of the state that wiped out beachfront communities and crippled shipping ports. Florida is home to over 19,000 manufacturers employing more than 331,000 workers, many of whom may temporarily be out of a job.[3] Initial estimates for the damage caused by Irma were between 150-200 billion, but have been reduced in recent days due to a change of course that caused the storm to mostly miss the most populated areas of the state, including Miami-Dade County. The total cost is still unknown.

Economic Impact

As noted earlier, many expect supply chains to be affected in the short term. According to the survey by the Institute for Supply Management, “67 percent of survey respondents believe input materials pricing will be at least somewhat negatively impacted over the next three months… 27 percent expect prices to be negatively or very negatively impacted.”[4] This may cause delays in deliveries, production time, and is cause for concern for economists who measure U.S. Gross Domestic Product.

The hurricanes have destroyed or crippled many businesses and permanently damaged infrastructure, which will add stress to the local and national economies. Goldman Sachs analysts warn that Hurricanes Harvey and Irma could have a “sizable” impact on the U.S. Economy. The bank reduced its GDP growth projections by 0.8% to 2%.[5]

Rebuilding Effort

Due to a concentrated effort by State and Federal officials, Texas and Florida ports are already starting to open today and many have had their power restored. “In the U.S., more than 50,000 utility workers from the U.S. and Canada are descending on Florida and other states hit by the storm, part of a long stream of trucks joining returning residents on highways with loads of water, generators, food and construction materials.”[6] There have also been an incredible amount of donations and people flooding into the areas affected. The effect on manufacturing and the economy might be short term, but local officials and residents will be cleaning up the mess made by these devastating hurricanes for months, if not years to come.

[1] US Manufacturing and Spending Seen Taking Short-Term Hit From Hurricane Harvey’s Impact
[2] Harvey has ‘paralyzed’ a critical part of US manufacturing supply chain
[3] Florida Manufacturing – Industry Overview
[4] Hurricanes Wreak Havoc on Supply Chains
[5] Hurricane Irma Might Have a Sizable Impact on U.S. Economy, Goldman Sachs Warns
[6] Top Supply Chain and Logistics News From WSJ